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A poor credit cuts off your funding most of the time. It indicates if your business is failing to cope up with all the loans, you have already taken as your business is not growing. However, if you are dedicated to your company and have a legit plan to make it work, you probably must be wondering how to get a small business loan with bad credit?
Worry no more! We have not one but ten options to help you get some funding to keep your business running:
- Accounts Receivable Financing
Accounts Receivable Financing is when you get about 80% of the total amount of each invoice paid immediately by a third-party. Your customer directly pays your client, who then releases the remaining amount of the total amount. Your client charges a fee for that without any collateral. With bad credit, your client continues to pay your invoices if you have great customers who pay you full and in time.
- Business Line of Credit
Business Line of Credit works just like credit cards. If you get approval for funding, you take the amount of money that your business needs and only pay the interest on that money. However, there is a proper schedule of repayment which you have to follow to continue getting these funds. With bad credit, you might not be able to get approved for the secured funds of this sort, but there is a high chance of acceptance for unsecured Business Line of Credit.
- Equipment Financing
If you are running your business with a bad credit score and you need new equipment or need to replace an old one, you can acquire a loan easily for that. In this loan, your new machinery, etc. will work as a collateral. So, if you are unable to pay in the scheduled time, your lenders can seize the items to cope up with their loss.
- Short Term Loans
Short Term Loans are an alternate version of Term Loans, especially for small businesses with a bad credit score. Thus, it is easy to acquire them. Banks provide you funding after you have paid the principal and interest off and signed the repayment schedule. You can use this money for all kinds of projects related to your business. However, you have to repay the loan in around 18 months.
- Merchant Cash Advance
A Merchant Cash Advance (MCA) helps you raise your capital value despite that it is not exactly a loan. Since you have bad credit, it is a great option. Though MCA, you get cash from your lender. In exchange, you agree upon a certain percentage with your lender of the sales you are going to make in the future.
- Unsecured Personal Loans
Unsecured Personal Loans are the easiest to acquire if your customer and loan payment history is secure. Personal Loans are usually protected with collateral, but Unsecured Personal Loans have no security. So, even if you fail to pay, you don’t face an immediate risk, but your lenders can take legal action against you. Also, the interest rate of these loans is higher because the lender is at a greater risk. All these reasons show that these loans might be beneficial, but it is unwise to acquire too many of them.
- Payday Loans
With Payday Loans, you get cash immediately with a fee, which might be a little higher. These loans are quick but small. Also, you have to pay these loans back with either your next paycheck or within a few weeks. So, even if these loans might be more comfortable and quicker to acquire with poor credit, they are not your best option.
- Payday Alternative Loans
Payday Alternative Loans (PALs) are a better option than Payday Loans. They save you the high fee of Payday Loans. They also have a more extended time repayment period, which usually lasts six months. However, you cannot get more than 1000 USD with PALs at a time.
- Pawn Shop Loans
Through Pawn Shop Loans, you get the cash in exchange for a valuable item that you possess. These loans have a higher interest rate and fee. Also, it can be hard to lose your useful, sentimental piece if you fail to repay.
- Auto Title Loans
A little different from Pawn Shop Loans, Auto Title Loans allow your vehicle to act as collateral. You have to repay the loan in the minimum amount of time, and the fee is usually high. This Loan is not beneficial if you doubt repaying in time.
Conclusion
Managing debts wisely is a tool your business needs, especially when your credit score is declining. Moreover, there can be various reasons for your bad credit score. So, you might have to look at other ways to improve your credit score apart from getting funds. Good Luck!
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